Stocks, commodities dip as Obama holds ground

US stocks retreated for a second day as President Barack Obama held his ground about raising tax rates for the highest-income Americans. Treasuries advanced while commodities and the Dollar Index remained lower.

The S&P 500 lost 0.3 per cent to 1,404.71 at 1:22 p.m. in New York, after briefly paring losses as Obama said there is potential to get a deal done and the economy is "poised to take off" once an agreement is reached. The S&P GSCI gauge of commodities slid 1 per cent cocoa and silver led declines. The Dollar Index slipped 0.3 per cent, headed for its longest slump in more than a year. The Stoxx Europe 600 Index closed less than 0.1 per cent higher after rallying 0.4 per cent earlier.

Obama said in a Bloomberg Television interview that a Republican offer on resolving the so-called fiscal cliff doesn't go far enough and won't raise the revenue needed to shrink the deficit by $US4 trillion over the next decade. The administration's rejection of a Republican plan that omits higher tax rates for top-earning Americans leaves the issue unresolved with about four weeks left before more than $US600 billion in tax increases and spending cuts start taking effect.

"The clock is ticking," said Quincy Krosby, market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $US1 trillion. "The focus is on what goes on in Washington. The market will be volatile. You've got to be very well hedged given that the market is so much headline-driven."

Market Leaders

Health-care and energy companies led gains among the 10 main industry groups in the S&P 500, while consumer- discretionary, telephone and financial shares retreated. Las Vegas Sands Corp. and Wynn Resorts Ltd. fell at least 2.8 per cent on bets China may increase scrutiny of junket operators in Macau, who provide credit to high-stake gamblers.

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The yield on the 10-year Treasury note fell two basis points to 1.60 per cent today.

Economists have cut their forecasts for the yield at the end of this year to the lowest since Bloomberg began surveying for the projection, on concern US politicians will struggle to avert the fiscal cliff. The 10-year rate will probably be 1.64 per cent by Dec. 31, less than the 1.75 per cent rate that economists saw at the start of November, according to Bloomberg surveys of the predictions.

European Markets

Among European stocks, Alcatel-Lucent SA rose 2.6 per cent after the company was said to be closer to obtaining financing of at least 1 billion euros ($US1.3 billion). TUI Travel Plc gained 3.4 per cent after Europe's largest tour operator reported earnings that topped analyst estimates. United Internet AG tumbled 8.3 per cent as Warburg Pincus LLC offered its 5.5 per cent stake for sale.

The dollar depreciated 0.3 per cent to $US1.3091 per euro after reaching $US1.3107, the weakest level since Oct. 18. It dropped 0.6 per cent against the yen.

Australia's dollar rose against 14 of 16 major peers, climbing 0.5 per cent to $US1.0475, as the central bank said demand outside the mining industry may rise after cutting interest rates to a half-century low of 3 per cent. The Swiss franc slipped 0.4 per cent to 1.2129 per euro, the weakest level since October.

Carbon dioxide permits fell as much as 4.5 per cent to 5.68 euros a metric ton, the lowest since they started trading in April 2005 on ICE Futures Europe in London. The European Union commission asked its 27 members to indicate Dec. 13 whether they support a plan to tackle a glut in the market.

India's Sensex gained 0.2 per cent as Parliament began debating whether to allow overseas supermarkets to enter the country before voting on the issue tomorrow.

The Shanghai Composite Index increased 0.8 per cent, rebounding from the lowest level since January 2009. The Shanghai Composite will rally 48 per cent within nine months after its decline below 1,960 signaled selling has climaxed, according to Tom DeMark, the creator of indicators to show turning points in securities.